OD4749 E-Trading Software Developers Industry Report PDF

INDUSTRY REPORT OD4749
e-Trading Software Developers
Click away: Higher demand from downstream companies will continue to drive
industry growth
Jonathan Hadad | December 2018
WWW.IBISWORLD.COM 1-800-330-3772 INFO@IBISWORLD.COM

e-Trading Software Developers December 2018
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Contents
ABOUT THIS INDUSTRY..................................3 COMPETITIVE LANDSCAPE.......................... 20
Industry Definition............................................................ 3 Market Share Concentration........................................... 20
Supply Chain..................................................................... 3 Key Success Factors...................................................... 20
Major Players.................................................................... 3 Cost Structure Benchmarks...........................................21
Main Activities.................................................................. 3 Basis of Competition...................................................... 22
Similar Industries.............................................................. 3 Barriers to Entry.............................................................. 22
Related International Industries........................................ 3 Industry Globalization..................................................... 23
AT A GLANCE...................................................5 MAJOR COMPANIES......................................24

Key Statistics Snapshot.................................................... 5 Major Players.................................................................. 24
Key Trends........................................................................ 5 Other Companies............................................................ 26
SWOT in the Industry........................................................ 5
Executive Summary.......................................................... 5 OPERATING CONDITIONS........................... 28
Industry Structure............................................................. 6
Key Industry Data..............................................................7 Capital Intensity.............................................................. 28
Major Players.................................................................... 8 Technology & Systems................................................... 29
Products & Services Segmentation.................................. 8 Revenue Volatility........................................................... 29
Regulation & Policy......................................................... 29
INDUSTRY PERFORMANCE.............................9 Industry Assistance........................................................ 30
Key External Drivers.......................................................... 9 KEY STATISTICS.............................................31

Industry Performance..................................................... 10
Industry Data Timeseries................................................12 Industry Data.................................................................. 31
Annual Change............................................................... 31
INDUSTRY OUTLOOK................................... 13 Key Ratios....................................................................... 31
Additional Resources......................................................32
Revenue Outlook.............................................................13 Industry Jargon...............................................................32
Industry Life Cycle.......................................................... 14 Glossary..........................................................................32
Products & Services Segmentation................................ 15
Supply Chain................................................................... 15
Products & Services........................................................15
Demand Determinants.................................................... 17
Major Markets................................................................ 18
International Trade......................................................... 19
Business Locations........................................................ 19
Legend
Icons are used throughout the report to indicate impact on the industry.
Negative impact
Neutral impact
Positive impact
About This Industry

Industry Definition This industry includes operators that primarily develop independent, third-party software, which enables
institutional and retail investors to access, execute and monitor positions in securities markets. It excludes
trading platforms developed by exchanges and alternative trading systems. Trading platforms developed
internally by institutional investors and financial intermediaries, such as banks and securities broker-
dealers, are also excluded from this industry.
Supply Chain Supply Industries Demand Industries
Computer Manufacturing Investment Banking & Securities Dealing
Computer Peripheral Manufacturing Securities Brokering
Computer & Packaged Software Commodity Dealing and Brokerage

Wholesaling
Private Equity, Hedge Funds & Investment
Computer Stores Vehicles
Commercial Leasing
Professional Employer Organizations
Major Players Charles Schwab
TD Ameritrade
FIS
Main Activities The primary activities of this industry are:
Develop electronic trading software
Develop order management system (OMS) platforms
Develop execution management system (EMS) platforms
The major products and services in this industry are:
Trading platforms
Technical analysis software
Trading signal generator software
Automated online trading software
Similar Industries 33411a - Computer Manufacturing in the US
This industry manufactures the computers used to run and test software.
51121 - Software Publishing in the US
This industry publishes the software tested by software testing firms. Testing is an integral part of the
software development process.
54151 - IT Consulting in the US
This industry provides technology development and implementation consulting, which includes software
testing services.
51121a - Operating Systems & Productivity Software Publishing in the US
This industry develops operating systems and related software products, which may require testing
services.
Related International J5420 - Software Publishing in Australia

Industries Software publishers create and distribute ready-made (non-customised) computer software.
6211 - Software Development in China
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The Software Development industry in China comprises establishments that primarily provide software
products, including applications software, system software and support software. Industry operators also
provide software-related services, such as software design, testing, outsourcing, programming and
analysis.
J58.290 - Software Publishing in the UK
This industry includes companies that publish ready-made non-customised software, engaging in activities
such as marketing, translation, technical support and the design of packaging and documentation. It does
not include the printing of software onto discs, which is done by downstream distributors, or the
programming of software, which is performed by software developers (see IBISWorld report J62.010).
Computer and video game publishing is also excluded (see IBISWorld report J58.210).
UK0.034 - App Development in the UK
Operators in this industry write, design and test software for smartphones, tablets and other mobile
devices. This industry only records revenue arising from development activities and does not include the
value of transactions carried out via the app.
UK0.036 - Financial Technology in the UK
The Financial Technology industry offers services that integrate finance with technology in order to
provide new or improved services to businesses and consumers. Many of the services offered by the
industry had previously been offered by traditional financial institutions such as banks.
51121CA - Software Publishing in Canada
Software publishers disseminate licences to customers for the right to execute software on their own
computers. Publishers market and distribute software products but may also design the software, produce
support materials and provide support services.
J58.200IE - Software Publishing in Ireland
This industry includes enterprises that publish ready-made, non-customised software, engaging in various
activities such as translation, technical support and design. Encompassed within the industry is also the
publishing of computer games for all platforms. Not included in the industry is the printing of software
onto discs, which is done by downstream distributors, or programming of software, usually performed by
separate developing companies (IBISWorld report J62.010IE).
J62.010IE - Software Development in Ireland
Software developers and computer programmers in this industry design, write, modify and test computer
code to implement systems software, application software, databases and web pages. Firms in this
industry also customise software so that it is functional within clients’ information system environment
and offer select after-sale services. Activities related to software publication, hardware design and
computer consultancy are not included in the scope of industry activities.
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At a Glance
Key Statistics Total Revenue Annual Growth Annual Growth
Snapshot 2018 2013-2018 2018-2023
$10.9bn 2.2% 1.8%

Profit Margin Wages as a share of Revenue Number of Businesses
2018 2018 2013-2018
31.7% 37.2% 3.5%
Key Trends The industry is consolidating to remain competitive
The industry experiences strong external competition from in-house IT departments

A greater emphasis on transparency boosted demand for industry software
Downstream demand from financial institutions will grow and improve profitability
Customization and internalization of industry software is accelerating
Wages are expected to increase in line with the number of employees
SWOT in the
Industry
Strengths Weaknesses Opportunities Threats
Growth Life Cycle Stage Medium & Decreasing High Revenue Growth Low Outlier Growth
Barriers to Entry (2005-2018)
Low Volatility Private investment in
Low & Steady Level of High Revenue Growth computers and software
Low Imports
Assistance (2013-2018)
High Profit vs. Sector
High Competition High Revenue Growth
Average
(2018-2023)
High Customer Class
Low Capital Requirements
Concentration High Performance Drivers
High Product/Service Investor uncertainty
Concentration
Executive The e-Trading Software Developers industry, defined as companies

Summary
that operate online securities trading websites and other software
programs for the securities market, has grown slightly over the five
years to 2018, increasing at an annualized rate of 2.2% to $10.9 billion
in 2018, including a 4.2% rise in 2018.
While major players, including the Charles Schwab Corporation, Fidelity Investments Inc. and Interactive
Brokers LLC (Interactive Brokers), recorded robust growth in the period, as investors increased their use of
online trading platforms, the industry was pulled back by smaller companies and start-ups that still make
up much of the industry. However, profit margins remained strong and comparable with other software
industries at 31.7% in 2018.
The percentages of services conducted online has increased at an annualized rate of 12.8% over the five
years to 2018, which has benefited the industry. As investors become more comfortable with and increase
their use of online services as a whole, they become more comfortable with the idea of trading and
performing other financial services online, which increases accounts. However, the number of shares
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traded has decreased during the same period, which hampered industry growth as many industry
companies generate revenue on a per-trade basis. Companies have been able to mitigate any damage and
have continued growing by offering value-added and nontraditional services to accountholders, which has
expanded their sources of revenue. For example, in 2015, Interactive Brokers acquired Covestor, a start-up
that serves as a collaboration platform and investor marketplace, and offers Interactive Brokers a new
avenue to generate revenue.
Over the five years to 2023, the industry is expected to continue growing at an accelerated annualized rate
of 1.8%, to an estimated $11.9 billion in 2023. Industry growth is closely tied to the continued increase in
the percentage of services conducted online. Similarly, demand from portfolio managers are expected to
decelerate, indicating that more investors will shift to technology-based investment management firms or
invest for themselves on trading platforms such as Interactive Brokers or E-Trade Financial Corporation.
Finally, increased service offerings will attract new customers to platforms.
Industry Structure Level Trend Level Trend
Life Cycle Growth Regulation Level Light Increasing
Revenue Volatility Low Technology Change High
Capital Intensity Low Barriers to Entry Medium Decreasing
Industry Assistance Low Steady Industry Globalization Low Steady
Concentration Level Low Competition Level High Increasing
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Key Industry Data
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Major Players
Products & Services

Segmentation
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Industry Performance
Key External Drivers
o Percentage of services conducted online
The percentage of services conducted online represents the use of the internet for services previously
rendered offline. As investing and other industry activity was once a true offline experience, a rise in this
driver benefits industry companies as people switch to online platforms. In 2018, the percentage of
services conducted online is expected to increase, representing a potential opportunity for the industry.
o Private investment in computers and software
The level of private investment in computers and software reflects the general adoption trend of
information technology from the private sector, including financial services industries. As more financial
institutions increasingly rely on information technology, demand for electronic trading software will grow.
Private investment in computers and software is expected to rise in 2018.
o Investor uncertainty
Investor uncertainty tracks the VIXCBOE, which monitors fear in the market. A higher value represents
greater uncertainty in the future of the S&P 500. Investor uncertainty is expected to increase in 2018; this
volatility may prompt investors to pull out of the market. Investors leaving the market could pose a
potential threat to industry revenue, as many companies generate revenue from commissions off trades.
o Demand from portfolio management
Industry companies are increasingly taking the role of portfolio managers. Computerized managers are
often considered more trustworthy because of the absence of bias, which often plagues human investors
and managers. People moving from human portfolio managers often begin using software programs as
substitutes. As a result, as demand decreases for portfolio management, demand should increase for
industry services. Portfolio management demand is expected to increase in 2018.
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Industry Performance The e-Trading Software Developers industry has expanded over the
five years to 2018, with revenue increasing at an annualized rate of
2.2% to $10.9 billion, including a 4.2% rise in 2018.
Growth has been slow as competition in the downstream financial services sector has increased, while
new technology trends have underpinned increases in electronic trading and spending by financial
institutions on industry software. Furthermore, since the majority of revenue is generated by online
brokerage companies that generally earn commission from trade executions, revenue has slowed as trade
volumes have decreased, forcing some companies to turn to other sources for revenue.
Changes in consumer behavior
Electronic trading software has benefited from consumers' increased familiarity and comfortability with
online services. Over the past five years, the percentage of services conducted online has increased at an
annualized rate of 12.8%, and in 2018, it is expected that 15.6% of services will be performed online.
Consumers are increasingly turning to online services, and trading financial securities is no different;
individual investors continue to shift from traditional investing to online trading. For example, industry
companies E-Trade Financial Corporation and TD Ameritrade both have reported strong growth in the
number of new accounts.
New entrants seek to disrupt
Financial technology (commonly known as fintech), where businesses bring technology to the financial
sector, is a rapidly growing market, as start-ups are seeking to bring innovation and new technology into
industries that have been dominated by slow-to-change multinational corporations. Though not every
company is relevant to this industry, the fintech market raised $13.5 billion in 2016 from venture
capitalists, according to CB Insights. Industry-relevant companies include Robinhood Markets Inc., a stock
trading platform that offers free trades, and Motif Investing Inc., a start-up that enables investors to invest
in groups of stocks or exchange-traded funds to get exposure to a particular industry or product line.
Changes in downstream financial services sector
Industry software plays a progressively integral role in a highly dynamic and fractured US financial market
system. Software connects institutional, retail and individual traders' electronic securities orders for
execution to the trading platforms of exchanges and alternative trading systems. It also routes orders
through a wide range of electronic communication networks and internal broker-dealer networks for
execution in over-the-counter markets. Improved data storage capacity and advancements in industry
software have lowered trading costs and significantly increased the speed and volume of worldwide
trading over the past five years. In turn, this trend has further increased demand because industry clients
realized higher trading revenue and return on their IT investments from integrating new electronic trading
software. In addition, industry developers also realize greater revenue from the expansion of computerized
(i.e. algorithmic) trading, estimated to account for between 50.0% and 70.0% of total US trading volume, by
developing new products catered to this market.
New regulations on the financial sector emanating from the recession, namely the Dodd-Frank Act and
Basel III in the United States, have induced an outpouring of technology spending by financial institutions.
To counter regulatory pressures, financial firms have increased their investments in new electronic trading
software to increase demand and improve operational efficiencies and profit. A greater emphasis on
transparency, data management and analytics in the sector and among investors has boosted demand for
industry software to improve portfolio management and reduce risk. Investor demand for access to
multiple asset classes, such as stocks, bonds, currencies, commodities and derivatives, globally and on a
single trading platform has also been a key driver of industry growth. Older electronic trading systems
have struggled to accommodate these new demands, which has prompted financial firms to invest in new
electronic trading software that can easily scale high trading volume to remain competitive.
Changing technology
Within the highly diverse and competitive financial technology and solutions market, there are three tiers of
companies that comprise the e-Trading Software Developers industry: a high number of small, specialized
data processing and trading software firms; divisions of larger software, IT and financial services
companies; and independent third-party online brokerage companies. Within the industry, companies
generally compete with each other in these three segments. Additionally, the industry experiences strong
external competition from in-house IT departments and software developers at financial companies that
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create company-specific, customized trading software. Rapid technological change and relatively low
barriers to entry keep the levels of industry competition and product and service innovation high.
An increased rate of product innovation and significant changes in the design and function of financial
software has been both a blessing and a curse to the industry over the past five years. Cloud computing
technologies, open and standardized development frameworks and the proliferation of data have led to
new software innovations, lowered software development costs and decreased software development
cycles. These technologies have driven convergence between the functionality of front-office trading
execution management systems and back-office order management systems. In turn, this resulted in new
software features and delivery models such as fully integrated trading platforms that combine market
data, analytics and best execution of securities trades into a single application user interface that can be
accessed by traders on multiple computing devices. New electronic trading platforms are more scalable,
adaptable and interoperable with existing systems, making the total cost of ownership lower and return on
investment higher for industry clients. Consequently, demand for industry electronic trading software has
risen over the past five years, as its value proposition to clients increased.
Industry landscape
Despite higher competition, the increased sophistication and value proposition of electronic trading
software for investors and financial firms helped industry developers retain pricing power and charge a
premium for their products over the past five years. Lower development costs and faster software times to
market also helped industry operators grow demand and improve profit margins. Consequently, profit
margins have remained near record highs. IBISWorld estimates that the average industry profit increased
from 26.8% in 2013 to 31.7% in 2018. However, profit margins for individual developers in the industry vary
depending upon its size, product and service mix and client base.
The industry is consolidating to remain competitive and keep pace with rapid product and service
innovation. Larger industry participants are making strategic acquisitions of smaller competitors to gain
new technologies, engineering talent and product and service capabilities to complement their existing
portfolios. Consequently, IBISWorld estimates that the rate of consolidation subdued the rate of new
market entrants, which caused the number of industry enterprises to slightly increase an annualized 3.5%
to 357 companies in 2018. As industry operators sought out employees with advanced expertise in user
interface design, the average wage has continued to rise. Over the past five years, wages are projected to
increase at an annualized rate of 5.0% to $4.1 billion.
Industry Data Private

investment in
Timeseries Domestic computers
Revenue IVA Estab. Enterprises Employment Exports Imports Wages Demand and software
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) ($b)
2003 4,416 2,812 290 212 10,884 N/A N/A 1,496 N/A 375
2004 4,998 3,047 312 226 11,274 N/A N/A 1,552 N/A 412
2005 5,885 3,485 353 255 13,155 N/A N/A 1,715 N/A 443
2006 6,404 3,835 366 257 14,251 N/A N/A 1,933 N/A 481
2007 7,193 4,362 377 272 15,499 N/A N/A 2,263 N/A 524
2008 7,757 4,825 373 263 17,816 N/A N/A 2,506 N/A 537
2009 8,006 4,914 372 263 18,014 N/A N/A 2,492 N/A 513
2010 8,284 5,148 360 255 17,566 N/A N/A 2,615 N/A 536
2011 8,913 5,426 360 249 17,514 N/A N/A 2,632 N/A 558
2012 10,292 6,087 454 316 21,739 N/A N/A 3,251 N/A 590
2013 9,810 5,987 445 301 21,364 N/A N/A 3,178 N/A 613
2014 9,466 6,259 422 291 20,325 N/A N/A 3,166 N/A 648
2015 9,842 6,664 453 313 22,183 N/A N/A 3,528 N/A 681
2016 10,159 6,918 479 332 23,340 N/A N/A 3,720 N/A 711
2017 10,474 7,413 493 342 23,816 N/A N/A 3,856 N/A 757
2018 10,913 7,741 515 357 24,980 N/A N/A 4,056 N/A 798
2019 11,028 7,821 523 362 25,388 N/A N/A 4,122 N/A 843
2020 11,289 8,006 542 376 26,285 N/A N/A 4,267 N/A 878
2021 11,520 8,175 551 382 26,823 N/A N/A 4,363 N/A 906
2022 11,738 8,339 573 398 27,607 N/A N/A 4,490 N/A 931
2023 11,928 8,475 584 405 28,111 N/A N/A 4,578 N/A 950
Industry Outlook
Over the five years to 2023, new product offerings and higher demand
from downstream financial services companies will continue to drive
growth in the e-Trading Software Developers industry.
Revenue is expected to rise at an annualized rate of 1.8% to $11.9 billion over the five years to 2023.
Investors will increasingly demand and invest in new trading platforms that combine advanced data
management, analytics and quicker execution times across numerous asset classes into a single
interface. Profitability is also expected to remain near current levels, though increases in labor will push
down profit slightly.
Changing investor demands
Investors' ongoing emphasis on data management and predictive analytics to improve investment returns
and reduce risk will keep industry product and service innovation high. Electronic trading software will
continue to trend toward more scalable, adaptable and interoperable systems that combine more
advanced data management, analytics and best execution features. These fully integrated trading
platforms will be available on multiple computing platforms, capable of trading multiple asset classes
globally, and they will quickly adapt to constantly changing investor timelines, income needs and risk
appetites.
Downstream demand from financial institutions will continue to grow due to industry software's ability to
streamline trading operations and improve profitability. Trading volume and the value traded will steadily
pick up in line with improvements in the general economy, which will increase the value of industry
software and IT spending by financial institutions. Total private investment in computers and software, an
indicator of the level of spending on and adoption of trading technologies, is forecast to grow during the
five-year period, bolstered by rising corporate profit.
Industry landscape
Customization and internalization of electronic trading software by larger financial institutions is

accelerating, which will intensify external competition and temper industry growth during the five-year
period. In particular, cloud computing technologies make it easier and more cost effective for financial
institutions to build, customize and deploy software developed by in-house IT departments. Customized,
internally developed electronic trading software can give financial intermediaries more freedom to adapt
to changing marketplace dynamics and adjust investment strategies.
Lower development costs and falling barriers to entry will also increase the number of new market
entrants. In response to heightened competition, industry consolidation will continue during the period as
larger companies continue acquiring smaller start-ups. However, the number of new developers entering
the industry is anticipated to outpace merger and acquisition activity. For this reason, the number of
industry enterprises is forecast to rise at an annualized rate of 2.6% to 405 companies over the five years
to 2023. Large and midsized electronic trading software vendors will continue to make strategic
acquisitions to realize cost efficiencies from scale, diversify their product and service offerings and
acquire new technologies and programming talent. The industry will approach a degree of saturation due
to the increasing variety of comparable industry electronic trading software, substitute products and
internal development.
The number of industry employees is expected to grow more robustly than the number of enterprises, at
an annualized rate of 2.4% to 28,111 workers over the five years to 2023. Companies will continue to seek
highly skilled programmers with expertise in advanced financial, statistical and user-interface design
concepts. Competition over the limited pool of developers with these skill sets will intensify, which will
drive up the average industry wage. Wages are expected to increase in line with the number of employees
during the five-year period, growing at an annualized rate of 2.5% to $4.6 billion. Rising wages will
contribute to slightly lower profit margins; the average industry profit margin is estimated to fall to 30.7%
in 2023.
Revenue Outlook Private

investment in
Domestic computers
Revenue IVA Estab. Enterprises Employment Exports Imports Wages Demand and software
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) ($b)
2018 10,913 7,741 515 357 24,980 N/A N/A 4,056 N/A 798
2019 11,028 7,821 523 362 25,388 N/A N/A 4,122 N/A 843
2020 11,289 8,006 542 376 26,285 N/A N/A 4,267 N/A 878
2021 11,520 8,175 551 382 26,823 N/A N/A 4,363 N/A 906
2022 11,738 8,339 573 398 27,607 N/A N/A 4,490 N/A 931
2023 11,928 8,475 584 405 28,111 N/A N/A 4,578 N/A 950
Industry Life Cycle The life cycle stage of this industry is Growth
Life Cycle Reasons The e-Trading Software Developers industry is in the growth stage of its life cycle, characterized by
o Industry value added will outpace
industry value added outpacing the overall economy, significant technology change and the rapid
overall economic growth over the introduction of new products. Industry value added, a measure of the industry's contribution to the overall
five years to 2023
economy, is expected to increase at an annualized rate of 3.5% over the 10 years to 2023, compared with
o Underlying demand continues to annualized GDP growth of 2.2% during the same period. This growth has come from new product offerings
rise
that were primarily driven by new technology advancements. New cloud computing, open and
There is a high level of product and
o
standardized development frameworks and data management technologies are leading to new software
service innovation
functionalities, lower software development costs and quicker deployment times. As a result, industry
participants have been able to more quickly design, build and bring new electronic trading software to the
market.
Products & Services Segmentation

Supply Chain
Products & Services
Trading platforms
Trading platforms are expected to account for 61.1% of industry revenue in 2018. Trading platforms offer
their users the ability to manually enter and execute trades with a broker. Most trading platforms require a
reliable internet connection and range in operating ability depending on the number of traders using the
software. Advanced trading platforms often include the ability to manage multiple trading accounts,
charting functionality and algorithmic trading support with back-testing capabilities. Over the past five
years, demand for trading platforms has continued to be strong as industry clients are constantly
searching for ways to cut costs through automation of some trading functions. Furthermore, new entrants
have put focus on new investors, mainly millennials, and have offered commission-free trading.
Automated online trading software
Automated online trading software is expected to account for 20.0% of industry revenue in 2018. Such
software is often also referred to as algorithmic trading software and operates according to a predefined
plan or algorithm set up manually by the client. These kinds of platforms require little to no manual
interaction and has been found to be quite good at taking human biases out of trading, which can increase
efficiency and save time and costs. Demand for automated or algorithmic trading software is projected to
continue to be strong over the next five years as industry participants develop more reliable systems for
their clients.
Trading signal generator software
Trading signal generator software does not trade automatically for the user. Instead, it provides users the
ability to be made aware of the market's level depending on predefined requests and be alerted of
potential trading opportunities. This kind of trading software provides a trader with suggested stop-loss
and take-profit levels, which enables the trader to manage losses and gains on any positions they take in
their trades. This software is expected to generate 13.5% of industry revenue in 2018.
Technical analysis software
Technical analysis software provides charts of historical exchange rates and technical indicators to aid
traders. Such software often enables the trader to plot the progress of exchange rates over time for
several time periods and to draw trend lines. Higher level software used by financial institutions that carry
out thousands of trades per day include features such as advanced line-drawing options, computing and
displaying pivot points and providing a wider range of complex technical indicators. IBISWorld expects
technical analysis software to represent 5.4% of industry revenue in 2018.
Demand Determinants Demand for the e-Trading Software Developers industry's products
depends on several factors, including macroeconomic conditions,
private investment in computers and software, the level of
technological change, the level of regulation and demand from
financial services industries.
When the economy is doing well, there tends to be higher levels of private investment in computers and
software as well as greater demand from financial services companies. However, in an economic
downturn, investors become thriftier and financial services companies reduce their demand for industry
products because trading levels decrease.
The recession shone a bright light on the lack of transparency and risk protection in financial services
industries. As a result, the federal government increased all aspects of regulation over these industries,
which forced them to invest in better back-end trading software to track risk and general trading activity.
Moving forward, government regulation is projected to continue to play an important role in determining
the level of demand for this industry.
The level of technological change also drives demand for industry products. When technological change is
rapidly accelerating, the industry is able to produce new products, which increases revenue. Conversely,
when the level of technological change decreases, there is less product innovation.
Finally, the level of market volatility plays a role in the level of trade volume. Increased volatility may
increase trade volume, as investors decide to shift investments. High trade volume results in higher
revenue by industry companies that generate income through commissions.
Major Markets
Online stock brokerages
Online stock brokerages are expected to account for 57.3% of revenue for the industry in 2018. High-net-
worth investors increasingly use full-service online brokerage firms, such as TD Ameritrade, Scottrade and
E-Trade, due to the scope of services and products they can provide as well as the quality of customer
service. Furthermore, online brokers also capture day-traders and individual investors. These brokerages
use e-trading software to offer their clients more efficient and less-expensive trading options, while also
offering traders autonomy in decision making and fast-executing trading.
Institutional investors
Institutional investors are expected to account for 33.2% of industry revenue in 2018. This segment
excludes principal transactions undertaken by financial institutions, but includes transactions by
institutions on behalf of third-party investors (both institutional and retail) such as managed funds. Over
the past five years, the institutional segment has grown with the overall industry, which is largely due to the
development of investment funds, such as exchange traded funds and master trusts, which are more
frequently being managed using e-trading software.
As a result of significant advances in e-trading software, trading costs across all categories, especially for
institutional investors, have dropped dramatically. The commissions received from institutional
transactions have also historically been lower than that for private clients, due to a sliding scale of
commissions based on transaction values, trade volume, and to the stronger negotiating position held by
institutions. To compensate for falling institutional commissions, the industry responded by engendering a
new style of investment management over the past 10 years, called algorithmic trading, where algorithms
embedded in servers direct and manage securities orders with minimal human interaction. Such software
is a cornerstone of this industry and is expected to continue adding value to institutional investing in
coming years.
Other
Other clients include individuals. Individuals have increasingly comprised a much smaller share of industry
revenue because they are starting to use online brokering services more frequently.
International Trade Exports in this industry are Low and Steady
Imports in this industry are Low and Steady
The e-Trading Software Developers industry does not have any international trade.
Business Locations
The e-Trading Software Developers industry, in line with the software sector as a whole, tends to cluster in
geographic areas with a high concentration of other technology firms and prominent universities. Since
the quality of a software product is only as good as the programmers who create it, companies place a
premium on maintaining proximity to highly skilled college graduates.
The West region's share of industry establishments (29.3%) indicates the prominence of California's
Silicon Valley region, which is home to a multitude of technology start-ups and software development
companies. In fact, California accounts for 20.4% of industry establishments. California's attractive
climate and multitude of high-profile universities, such as Stanford and the California Institute of
Technology, make it an attractive location for e-trading software developers to recruit skilled graduates.
While the West region will likely maintain its position as a software powerhouse in the future, other regions
have experienced an increase in their share of industry establishments over the past five years. Texas
accounts for 6.2% of industry establishments and represents the second-largest concentration of industry
firms behind California. Austin, TX, has experienced a recent boom in technology start-ups and represents
a desirable area for firms seeking to maintain proximity to other technology firms. The third- and fourth-
largest states by share of establishments are New York (5.6%) and Florida (5.0%).
Competitive Landscape
Market Share Concentration in this industry is Low
Concentration
The e-Trading Software Developers industry exhibits a high level of concentration, with the largest industry
player accounting for 25.3% of industry revenue in 2018. Though the top five companies generated more
than 70.0% of total industry revenue, the industry is still slightly fragmented, as the remaining 30.0% of
revenue is generated by more than 300 companies. Furthermore, over the five years to 2018, the number
of industry enterprises has increased at an annualized rate of 3.5% to 357 operators. Larger companies
are acquiring smaller ones with talented employees and innovative software to increase their own scale
and protect their market share. However, over the next five years, falling barriers to entry will lead to a
faster increase in enterprise growth, contributing to a more fragmented industry.
Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
 Undertaking technical research and development: Industry software developers spend large amounts
on research and development, leading to more innovative and easy-to-use products.
 Access to highly skilled workforce: Industry operators employ highly skilled software developers who
possess a specific skill set and capacity for creativity.
 Close monitoring of competition: Software developers need to keep a constant eye on the products and
strategies used by competitors. Frequently, software developers form informal partnerships with each
other, encouraging customers to use a specific set of software.
 Effective marketing: Successful industry operators present their products in terms that are practical and
attractive to their clients.
Cost Structure
Benchmarks
Profit
The e-Trading Software Developers industry is highly profitable, similar to other technology industries. In
2018, the average industry profit margin, measured by earnings before interest and taxes, is expected to
represent 31.7% of revenue. The industry's high profitability is derived from the protected status of
software under intellectual property laws and the front-loaded investment nature of software development.
However, on an individual company basis, many industry software publishers go out of business before
developing a successful product. Conversely, operators that release successful software can have strong
cash flow for years, and the production costs of additional copies of software are minimal. Major company
Interactive Brokers consistently generates profit margins north of 40.0%.
Wages
Labor is a major cost for industry operators. In 2018, IBISWorld estimates wages comprise 37.2% of
expenses. Companies operate in a market that places a premium on innovation, ease of use and
technological capability. These requirements drive companies to employ highly skilled software
developers. Industry operators seek creative software developers with degrees from prestigious
universities. Competing participants are often seeking to poach these high-value employees, making their
compensation a key expense and causing wage costs to increase.
Purchases
Purchases are a small expense for industry operators. In 2018, purchases are estimated to account for
3.9% of expenses for the average company. Purchases mostly consist of fixed costs like other software
packages and computing equipment, but also include the licensing or outright purchase of a third party's
intellectual property. Purchases have remained stable over the past five years.
Marketing
Marketing and advertising expenses generally amount to 3.0% of total costs, though this figure varies
significantly depending on the company. Companies typically invest in web marketing, direct-mail and
email campaigns, social media platforms and magazine advertising and coordinated promotional offers
with major retailers.
Depreciation
Depreciation expenses amount to 2.0% of total costs for industry operators. Depreciable assets include
technological machinery.
Rent
In 2018, IBISWorld estimates that expenses on rent will account for 0.8% of total industry revenue. Rent
pays for the workspace that operators use to run their business out of.
Utilities
Over the five years to 2018, utilities costs have remained steady at 0.1% of total industry revenue. Utilities
include water, electric, internet access and transportation.
Other Costs
Combined, other costs account for 21.3% of industry revenue is composed of a variety of expenses,
including professional fees, courier services, travel expenses, insurance premiums, legal fees, cleaning
services and other administrative costs. Industry operators also spend a significant portion of their
revenue on research and development (R&D). According to data from the US National Science Foundation,
the information and electronics sector spends more money on R&D than any other sector in the United
States. Since product innovation plays a key role in the success of most industry operators, companies
may allocate as much as one-fifth of revenue to R&D; some companies spend even more. A company with
a highly attractive patent portfolio but weak cash flow can become a highly sought-after acquisition target.
The emphasis on R&D and patents leads to frequent legal wrangling between publishers and patent
holders.
Basis of Competition Competition in this industry is High and the trend is Increasing
Internal competition
The e-Trading Software Developers industry has a high level of internal competition. Competition is based
on timeliness of processed information provided to customers, features and adaptability of the software,
level and quality of customer support, degree of responsiveness, level of software development expertise,
total cost of ownership and return on investment. In terms of pricing, industry operators compete on the
basis of total cost of ownership, rather than the initial price. Customers evaluating software purchasing
options consider nonobvious costs, such as the availability of technical support, frequency of updates,
security and the cost of transitioning from an existing software package. Intense competition has tended
to put pricing pressure on industry participants.
Security is an increasingly important design focus for industry developers. The downside of ubiquity for
software is that it makes that software a more attractive target for viruses or other malicious software.
With the internet being an integral part of the way people use computers, the risk of security breaches has
increased. Moreover, companies store substantial amounts of sensitive private data, which they can be
held liable for in the event of a damaging security breach. Software developers can improve the security of
their products by more widely using data encryption, modular coding and limiting the administrative
privileges of software.
Ubiquity and compatibility are tightly related competitive aspects for industry products. When a particular
software product has a large market share, that market share tends to continue growing because
consumers and businesses alike prefer to buy widely used software that other people have had experience
working with.
External competition
The e-Trading Software Developers industry contends with increasing competition from its clients. In the
recession, many client firms started developing custom trading software in-house, which took business
from industry participants. Over the next five years, IBISWorld expects this internalization trend to continue
as clients continue to find ways to cut costs in light of higher regulation and lower profit margins.
Barriers to Entry Barriers to Entry in this industry are Medium and the trend is Decreasing
The industry has moderate barriers to entry.
Software development is an area in which it is difficult for incumbent firms to create a real barrier to entry
unless the company can create a network effect. A network effect is the effect that one user of a good or
service has on the value of that product to other people. When network effect is present, the value of a
product or service is dependent on the number of users. The network effect has been eroded over the past
five years due to the increasing interoperability of software, mounting use of open-source software and the
move to internet-based services.
The limited pool of skilled workers creates another barrier to entry. Since industry software developers
require highly specialized skills, including knowledge of different programming languages and experience
in collaborative design, recruiting skilled workers can be a barrier to entry. Due to the high level of
competition for skilled software developers, industry wages are relatively high to retain skilled workers.
The fast rate of technological change presents another barrier. Software companies must consistently
innovate to stay ahead of the industry's swift technological advances. Consequently, industry operators
typically spend about one-fifth of their revenue on research and development and patent acquisition.
Patents on intellectual property are commonly used to limit competition.
Barriers to Entry Checklist
Competition High
Concentration Low
Life Cycle Stage Growth
Technology Change High
Regulation & Policy Light
Industry Assistance Low
Industry Globalization Globalization in this industry is Low and the trend is Steady
The e-Trading Software Developers industry is somewhat globalized. There is no measurable level of
international trade in the industry, since software systems can be digitally distributed at minimal costs
across borders. However, companies in the industry do market their products internationally.
Major Companies
Major Players
The Charles Schwab Corporation
Market Share: 25.3%
The Charles Schwab Corporation (Schwab) is a consumer bank and brokerage firm that was founded in
1971 and based in San Francisco, CA. Schwab employs more than 16,000 people and generates all
revenue in the United States. The company competes in this industry through its investor services
segment, where members can execute investment trades online. In 2017, the company generated $8.6
billion in total company revenue.
Schwab maintains a network for more than 11.6 million accounts, though not every accountholder
participates in industry-relevant activity. For example, Schwab acts as a consumer bank and has
branches across the United States, where members can secure a home loan and invest in financial
instruments offline. Finally, Schwab also generates revenue through nonindustry-relevant investment
activity, such as mutual funds clearing services, retirement plans and the sale of exchange-traded funds.
Financial performance
Over the five years to 2018, Schwab's industry-relevant revenue has increased at an annualized rate of
14.9% to an estimated $2.8 billion in 2018. Revenue has consistently risen throughout the period, as
Schwab has added more than 2.0 million new accounts. Furthermore, revenue per account has
increased, contributing to the company's growth in this industry.
TD Ameritrade
Market Share: 18.6%
Based in Omaha, NE, TD Ameritrade (TD) is a brokerage firm that offers online and in-person trading
options. Though traded as a public and independent company, Toronto-Dominion Bank is its largest
shareholder and the source of the company's name (TD). With more than 6,000 employees and
operating in only one segment, TD generated $3.7 billion in total company revenue in 2017. That same
year, TD acquired Scottrade, a large online brokerage company, for $4.0 billion, which is expected to
increase its revenue substantially over the coming years.
Similar to other industry companies with only one segment, TD generates revenue in various ways. The
only industry relevant revenue sources are commissions and transaction fees, which represent about
40.0% of total company revenue in any given year. Other sources including account fees, investment
product fees and interest revenue.
Over the five years to 2018, TD's revenue has increased at an annualized rate of 11.6% to an estimated
$2.0 billion in 2018. Revenue grew fast in the beginning of the period, before turning to negative territory
in the latter half. However, the company added nearly 5.0 million accounts with the acquisition of
Scottrade, which has is expected to contribute to a large jump in revenue between 2017 and 2018, the
first full year after the acquisition.
Fidelity National Information Services Inc.
Market Share: 18.3%
Headquartered in Jacksonville, FL, Fidelity National Information Services Inc. (FIS) provides banking and
payments technologies, including software development services and technology outsourcing, as well
as an online trading platform for individual investors. The company serves more than 20,000 clients in
more than 130 countries. As of 2016, the company employed more than 55,000 employees worldwide.
In 2015, FIS acquired previous major player SunGard in a $9.3 billion deal to increase service offerings in
retail, enterprise and wholesale banking and payments capabilities.
FIS's global financial systems segment provides software and technology services to financial
institutions, corporate and government treasury departments and energy trading companies. The
company's products help these organizations automate complex business processes associated with
trading, managing investment portfolios and accounting for investment assets. SunGard organizes its
financial systems segment into asset management, banking, brokerage, capital markets, corporate
liquidity, energy, insurance and wealth and retirement administration. The company's capital markets
solutions business is the primary developer and provider of electronic trading software.
FIS offers several online trading technology solutions, including BondOne, Front Arena, Fox River, Valdi,
Stream and Intrader. The company's software helps banks, brokers and dealers, futures commission
merchants and other financial institutions to improve the efficiency, transparency and management of
their trading activities across multiple platforms, asset classes and markets. These products fulfill both
front- and back-office functions, such as trade processing and confirmation, clearing and settlement,
recordkeeping and accounting.
Over the five years to 2018, industry-relevant revenue has increased an annualized 26.8% to $2.0 billion.
The acquisition of SunGard helped grow and improve FIS's products and services, as well as scale them
to its large and diverse client base. Consequently, while North America and Western Europe still account
for the majority of the company's financial systems revenue, emerging markets in Asia, Africa, Latin
America, Eastern Europe and the Middle East are prime growth targets for the segment moving forward.
As a result, industry-specific revenue experienced exceptionally strong growth in 2016, growing 80.1%,
as a result of new synergies between the two companies and increased demand for industry products
by clients.
Other Companies E-Trade Financial Corporation
Market Share: 4.7%

E-Trade Financial Corporation (E-Trade) is a New York City-based online stock brokerage company. E-
Trade enables more than 3.5 million individual investors to invest in stocks and other financial instruments
on its platform. Founded in 1982 in Palo Alto, CA, E-Trade employs 3,600 people across the United States
and generated $2.3 billion in total company revenue in 2017.
As of 2017, E-Trade does not have separate operating segments. However, E-Trade generates revenue in
various ways, though the only industry-relevant revenue generation method is through commissions
earned by executing trades. In 2016, E-Trade executed more than 41.3 million revenue trades, near a five-
year high of 42.5 million trades in 2014; in 2017, this increased to nearly 54.0 million. However, revenue per
trade declined to a five-year low of $8.23 in 2017, as increased competition put pressure on prices. In
September 2016, E-Trade acquired OptionsHouse, another online stock brokerage company, for $725.0
million, which have contributed to increased trading volume. E-Trade's industry-relevant revenue is
expected to rise to $510.0 million in 2018.
Interactive Brokers Group
Market Share: 4.7%

Headquartered in Greenwich, CT, Interactive Brokers Group, the parent company of Interactive Brokers LLC
(Interactive Brokers) is an online brokerage firm. Interactive Brokers was founded in 1978 and has grown
to 24 offices in 12 countries. The company serves more than 385,000 accounts across 190 countries,
though accountholders on the Interactive Brokers platform tend to trade more frequently than those on
other platforms, which puts revenue on par with other larger companies. In 2017, the company generated
$1.7 billion in total revenue.
Interactive Brokers operates under three business segments: electronic brokerage, market making and
corporate. The only industry-relevant segment is electronic brokerage. Within this segment, Interactive
Brokers generates industry-relevant revenue through commissions revenue. Interactive Brokers is popular
among traders and gives access to more than 120 exchanges in 24 countries. In 2015, the company
increased its online presence by acquiring Covestor, an online investment marketplace where individuals
can match with and learn from portfolio managers.
Over the five years to 2018, Interactive Brokers' revenue increased at an annualized rate of 8.3%, to an
estimated $510.7 million in 2018. Revenue growth comes as the company continues to add more users.
Between 2015 and 2016, accounts rose 16.0% to 385,000. Furthermore, operating income has remained
strong and reached more than 40.0% of revenue multiple years during the period.
Operating Conditions
Capital Intensity
The level of capital intensity is Low
The e-Trading Software Developers industry has a low level of capital intensity. In 2018, for every dollar
spent on wages, operators typically spend $0.05 on capital equipment and machinery. Capital investment
is primarily limited to property, computers and office furnishings required to house employees. In many
ways, software can be considered an intangible product; producing quality software that chiefly requires
talented employees and time. Since industry operators compete for a pool of very scarce software
development talent that is in high demand, labor expenses are very high on a per-employee basis.
Furthermore, labor expenses account for 37.2% of companies' typical expenses.
Technology & The level of technology change is High

Systems
The e-Trading and Software Developers industry has a high and
increasing level of technology change.
Cloud computing and open and standardized development frameworks have rapidly changed the design
and functionality, development, use and deployment of industry software over the past five years. Industry
software is increasingly scalable and adaptable to investor trading needs and has increased
interoperability with a wide range of existing trading systems to give investors broker-neutral access to
multiple asset classes and trading venues worldwide. Traditionally, industry trading platforms could be
broadly divided into order management systems (OMS) and execution management systems (EMS). OMS
were designed as tools to enable firms to manage and document their trading activities electronically for
back-office functions such as record keeping and settlement. In comparison, EMS were developed to
facilitate and manage the execution of securities orders, typically through standardized financial
information exchange (FIX) protocols. Over the past five years, the design and functionalities of these two
platforms have converged and given rise to fully integrated trading platforms that permit broker-neutral
trading across multiple asset classes and trading venues. On the development side, industry companies
have reduced development costs by making use of open source and standardized development
frameworks that enable developers to quickly make incremental and modular improvements to industry
software that has decreased product development cycles. Finally, cloud computing technologies have
transitioned some industry companies toward a software-as-a-service model with more stable licensing
revenue and enabled investors to use industry software across numerous computing platforms.
Revenue Volatility The level of volatility is Low
The e-Trading Software Developers industry has a low level of revenue volatility. Over the five years to
2018, revenue has fluctuated an average of 2.1% annually. Revenue typically fluctuates depending on the
level of demand from financial firms, private investment in computers and software and investments by
individuals. Additionally, the amount of corporate profit and degree of technological change can have
similar effects on the industry's performance.
Regulation & Policy The level of regulation is Light and the trend is Increasing
E-trading software developers contend with few formal regulations. Nevertheless, industry success
primarily depends upon their proprietary technology; therefore, failure to protect this technology can lead
to the loss of valuable assets and competitive advantage. Industry operators protect their proprietary
technology through the use of patents, copyrights, trademarks, trade secret laws, confidentiality
procedures and contractual provisions.
Congress passed the Sherman Antitrust Act, the Wilson Act, the Clayton Act and the Robinson-Patman Act
along with various other regulations regarding unfair competition. In addition to this, some states have
introduced their own antitrust laws to ensure that the general public is provided with best prices, quality
and competition among businesses.
US copyright laws protect copyright owners from the unauthorized reproduction, adaptation, performance,
display or distribution of copyright protected works. The Fair Use Doctrine in US copyright law limits the
extent to which a citizen may use a quote from copyrighted material depending on the nature of the use
(e.g. commercial, nonprofit or educational use).
The Sonny Bono Copyright Term Extension Act of 1998 extended US copyright from the life of the author
plus 50 years, to the life of the author plus 70 years. The Digital Millennium Copyright Act of 1998
criminalized some cases of copyright infringement and prohibits the manufacture and distribution of
services designed for the sole purpose of undermining technology used to protect copyrighted works.
Further, the No Electronic Theft Law of 1997 permits individuals of computer program infringements to be
criminally prosecuted, even when no monetary profit or commercial gain is derived from the activity.
Indirect regulation
Industry businesses are not directly subject to federal or state regulations specifically applicable to
financial institutions such as banks and investment firms. However, as providers of services to financial
institutions, industry operators are examined by the Federal Financial Institution Examination Council
under the Information Technology examination guidelines.
The financial services sector is subject to extensive and complex federal and state regulation. The Great
Recession caused regulation in the financial services sector to increase over the past five years, which
indirectly increases regulation in the e-Trading Software Developers industry. The industry's financial
institution customers, which include investment banks, operate in markets that are subject to rigorous
regulatory oversight and supervision. The compliance of industry products and services with these
requirements depends on a variety of factors including the particular functionality, the interactive design
and the charter or license of the financial institution. Customers in the financial services market must
independently assess and determine what is required of them under these regulations and are responsible
for ensuring that industry products and the design of their websites conform to their regulatory
obligations.
Industry Assistance The level of industry assistance is Low and the trend is Steady
The e-Trading Software Developers industry does not receive any assistance from local, state or federal
government sources. However, companies may receive funding from private sources such as venture
capital groups; Robinhood, a stock brokerage app that is marketed to millennials, has secured $176.0
million from dozens of investors.
Key Statistics
Industry Data
Private
Domestic investment in
Revenue IVA Establishments Enterprises Employment Exports Imports Wages Demand computers and
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) software ($b)
2009 8,006 4,914 372 263 18,014 N/A N/A 2,492 N/A 513
2010 8,284 5,148 360 255 17,566 N/A N/A 2,615 N/A 536
2011 8,913 5,426 360 249 17,514 N/A N/A 2,632 N/A 558
2012 10,292 6,087 454 316 21,739 N/A N/A 3,251 N/A 590
2013 9,810 5,987 445 301 21,364 N/A N/A 3,178 N/A 613
2014 9,466 6,259 422 291 20,325 N/A N/A 3,166 N/A 648
2015 9,842 6,664 453 313 22,183 N/A N/A 3,528 N/A 681
2016 10,159 6,918 479 332 23,340 N/A N/A 3,720 N/A 711
2017 10,474 7,413 493 342 23,816 N/A N/A 3,856 N/A 757
2018 10,913 7,741 515 357 24,980 N/A N/A 4,056 N/A 798
2019 11,028 7,821 523 362 25,388 N/A N/A 4,122 N/A 843
2020 11,289 8,006 542 376 26,285 N/A N/A 4,267 N/A 878
2021 11,520 8,175 551 382 26,823 N/A N/A 4,363 N/A 906
2022 11,738 8,339 573 398 27,607 N/A N/A 4,490 N/A 931
2023 11,928 8,475 584 405 28,111 N/A N/A 4,578 N/A 950
Annual Change
Private
Domestic investment in
Revenue IVA Establishments Enterprises Employment Exports Imports Wages Demand computers and
(%) (%) (%) (%) (%) (%) (%) (%) (%) software (%)
2009 3.21 1.85 -0.27 0.00 1.11 N/A N/A -0.55 N/A -4.53
2010 3.47 4.75 -3.23 -3.05 -2.49 N/A N/A 4.91 N/A 4.42
2011 7.59 5.40 0.00 -2.36 -0.30 N/A N/A 0.66 N/A 4.12
2012 15.5 12.2 26.1 26.9 24.1 N/A N/A 23.5 N/A 5.73
2013 -4.68 -1.65 -1.99 -4.75 -1.73 N/A N/A -2.25 N/A 3.98
2014 -3.52 4.55 -5.17 -3.33 -4.87 N/A N/A -0.38 N/A 5.74
2015 3.98 6.46 7.34 7.56 9.14 N/A N/A 11.4 N/A 4.96
2016 3.21 3.82 5.73 6.07 5.21 N/A N/A 5.45 N/A 4.40
2017 3.09 7.15 2.92 3.01 2.03 N/A N/A 3.66 N/A 6.54
2018 4.19 4.42 4.46 4.38 4.88 N/A N/A 5.16 N/A 5.40
2019 1.05 1.03 1.55 1.40 1.63 N/A N/A 1.62 N/A 5.62
2020 2.36 2.36 3.63 3.86 3.53 N/A N/A 3.53 N/A 4.19
2021 2.04 2.11 1.66 1.59 2.04 N/A N/A 2.24 N/A 3.09
2022 1.89 1.99 3.99 4.18 2.92 N/A N/A 2.90 N/A 2.80
2023 1.62 1.63 1.91 1.75 1.82 N/A N/A 1.94 N/A 2.00
Key Ratios
Imports/ Exports/ Revenue per Wages/ Employees per
IVA/Revenue Demand Revenue Employee Revenue estab.
(%) (%) (%) ($'000) (%) (units) Average Wage ($)
2009 61.4 N/A N/A 444 31.1 48.4 138,348
2010 62.1 N/A N/A 472 31.6 48.8 148,844
2011 60.9 N/A N/A 509 29.5 48.6 150,280
2012 59.1 N/A N/A 473 31.6 47.9 149,561
2013 61.0 N/A N/A 459 32.4 48.0 148,769
2014 66.1 N/A N/A 466 33.5 48.2 155,788
2015 67.7 N/A N/A 444 35.8 49.0 159,036
2016 68.1 N/A N/A 435 36.6 48.7 159,392
2017 70.8 N/A N/A 440 36.8 48.3 161,929
2018 70.9 N/A N/A 437 37.2 48.5 162,358
2019 70.9 N/A N/A 434 37.4 48.5 162,340
2020 70.9 N/A N/A 429 37.8 48.5 162,347
2021 71.0 N/A N/A 429 37.9 48.7 162,670
2022 71.0 N/A N/A 425 38.3 48.2 162,644
2023 71.1 N/A N/A 424 38.4 48.1 162,837
Additional Resources The Software and Information Industry Association

http://www.siia.net
US Census Bureau
http://www.census.gov
US Securities and Exchange Commission

http://www.sec.gov
Financial Industry Regulatory Authority

http://www.finra.org
Industry Jargon EXECUTION MANAGEMENT SYSTEM (EMS)

This front-office trading platform traditionally let investors trade execute and mange securities orders
across multiple trading venues. Its functionality has evolved and converged with OMS systems.
HEDGE FUND
An aggressively managed portfolio of investments that uses advanced investment strategies to generate
high returns. Hedge funds have a limited number of investors and require high initial investment.
INTEROPERABILITY
The ability for trading systems to exchange and use information with other trading systems with differing
technologies and ages as part of a larger financial market system.
ORDER MANAGEMENT SYSTEM (OMS)

This back-office trading platform traditionally let investors keep track of and document their investment
activities. Its functionality has evolved and converged with EMS systems.
Glossary BARRIERS TO ENTRY

High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is
easy for new companies to enter an industry.
CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on
labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital
intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor;
low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current
year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of
the dollar, leaving only the "real" growth or decline in industry metrics. The inflation adjustments in
IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND
Spending on industry goods and services within the United States, regardless of their country of origin. It is
derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT
The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners,
managers and executives within the industry.
ENTERPRISE
A division that is separately managed and keeps management accounts. Each enterprise consists of one
or more establishments that are under common ownership or control.
ESTABLISHMENT
The smallest type of accounting unit within an enterprise, an establishment is a single physical location
where business is conducted or where services or industrial operations are performed. Multiple
establishments under common control make up an enterprise.
EXPORTS
Total value of industry goods and services sold by US companies to customers abroad.
IMPORTS
Total value of industry goods and services brought in from foreign countries to be sold in the United
States.
INDUSTRY CONCENTRATION
An indicator of the dominance of the top four players in an industry. Concentration is considered high if the
top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue.
Low is less than 40%.
INDUSTRY REVENUE
The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production;
all other operating income from outside the firm (such as commission income, repair and service income,
and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest
royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)

The market value of goods and services produced by the industry minus the cost of goods and services
used in production. IVA is also described as the industry's contribution to GDP, or profit plus wages and
depreciation.
INTERNATIONAL TRADE
The level of international trade is determined by ratios of exports to revenue and imports to domestic
demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%.
Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE
All industries go through periods of growth, maturity and decline. IBISWorld determines an industry's life
cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number
of establishments; the amount of change the industry's products are undergoing; the rate of technological
change; and the level of customer acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT
Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by
self-employed individuals.
PROFIT
IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding interest and tax.
REGIONS
West | CA, NV, OR, WA, HI, AK Great Lakes | OH, IN, IL, WI, MI Mid-Atlantic | NY, NJ, PA, DE,
MD New England | ME, NH, VT, MA, CT, RI Plains | MN, IA, MO, KS, NE, SD, ND Rocky
Mountains | CO, UT, WY, ID, MT Southeast | VA, WV, KY, TN, AR, LA, MS, AL, GA, FL, SC,
NC Southwest | OK, TX, NM, AZ
VOLATILITY
The level of volatility is determined by averaging the absolute change in revenue in each of the past five
years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is
±3% to ±10%; and low volatility is less than ±3%.
WAGES
The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in
this figure.
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OD4749 E-Trading Software Developers Industry Report PDF

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OD4749 E-Trading Software Developers Industry Report PDF

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INDUSTRY REPORT OD4749

e-Trading Software Developers

Jonathan Hadad | December 2018

WWW.IBISWORLD.COM 1-800-330-3772 INFO@IBISWORLD.COM

AT A GLANCE...................................................5 MAJOR COMPANIES......................................24

Key External Drivers.......................................................... 9 KEY STATISTICS.............................................31

About This Industry

Supply Chain Supply Industries Demand Industries

Computer Manufacturing Investment Banking & Securities Dealing

Computer Peripheral Manufacturing Securities Brokering

Computer & Packaged Software Commodity Dealing and Brokerage

Professional Employer Organizations

Major Players Charles Schwab

Main Activities The primary activities of this industry are:

Develop electronic trading software

Develop order management system (OMS) platforms

Develop execution management system (EMS) platforms

The major products and services in this industry are:

Technical analysis software

Trading signal generator software

Automated online trading software

Similar Industries 33411a - Computer Manufacturing in the US

51121 - Software Publishing in the US

54151 - IT Consulting in the US

51121a - Operating Systems & Productivity Software Publishing in the US

Related International J5420 - Software Publishing in Australia

6211 - Software Development in China

J58.290 - Software Publishing in the UK

UK0.034 - App Development in the UK

UK0.036 - Financial Technology in the UK

51121CA - Software Publishing in Canada

J58.200IE - Software Publishing in Ireland

J62.010IE - Software Development in Ireland

$10.9bn 2.2% 1.8%

31.7% 37.2% 3.5%

Key Trends The industry is consolidating to remain competitive

The industry experiences strong external competition from in-house IT departments

Customization and internalization of industry software is accelerating

Wages are expected to increase in line with the number of employees

Strengths Weaknesses Opportunities Threats

Executive The e-Trading Software Developers industry, defined as companies

Industry Structure Level Trend Level Trend

Life Cycle Growth Regulation Level Light Increasing

Revenue Volatility Low Technology Change High

Capital Intensity Low Barriers to Entry Medium Decreasing

Industry Assistance Low Steady Industry Globalization Low Steady

Concentration Level Low Competition Level High Increasing

Key Industry Data

Products & Services

o Percentage of services conducted online

o Private investment in computers and software

o Demand from portfolio management

Changes in consumer behavior

New entrants seek to disrupt

Changes in downstream financial services sector

Industry Data Private

Changing investor demands

Customization and internalization of electronic trading software by larger financial institutions is

Revenue Outlook Private

Products & Services Segmentation

Products & Services

Automated online trading software

Trading signal generator software

Regulation & Policy Light